To conduct monetary policy the central bank makes use of several instruments to manipulate money supply...

 

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To conduct monetary policy the central bank makes use of several instruments to manipulate money supply and influence interest rates. a. Explain how the central bank uses open market operations to change money supply and ultimately interest rates. b. Assume that there are large number of people unemployed in an economy. Explain how the central bank monetary policy affects the unemployment level. c. Explain the meaning of passive and active monetary policy and show under what conditions the central bank uses these policies. d. You deposit $1000,000 in your account. You decided to withdraw 20 percent in cash. If the required reserve ratio is 15 percent, what impact your deposit will have on money supply? To conduct monetary policy the central bank makes use of several instruments to manipulate money supply and influence interest rates. a. Explain how the central bank uses open market operations to change money supply and ultimately interest rates. b. Assume that there are large number of people unemployed in an economy. Explain how the central bank monetary policy affects the unemployment level. c. Explain the meaning of passive and active monetary policy and show under what conditions the central bank uses these policies. d. You deposit $1000,000 in your account. You decided to withdraw 20 percent in cash. If the required reserve ratio is 15 percent, what impact your deposit will have on money supply?

Answer rating: 100% (QA)

SOLUTION a Open market operations refer to the buying and selling of securities by the central bank in the open market When the central bank buys secu... View the full answer